Why Freetrade is my favourite fintech

Many investors restrict themselves to major platforms such as Hargreaves Lansdown. But there are other options. Freetrade is one that's well worth a look.

Many investors restrict themselves to major platforms such as Hargreaves Lansdown. But there are other options. And Freetrade is one that's well worth a look.

Investment trust savings schemes and, more recently, investment platforms such as Hargreaves Lansdown (HL) have been helpful resources for investors keen to put money aside on a regular basis and gain access to an array of assets for a reasonable price. But now fintechs are providing more and more competition. One in particular, Freetrade, is well worth a look.

I've been road-testing this app-based service for six months and although there are some flaws I think it could be a great way of running, say, a child's savings scheme through an individual savings account (Isa).

A good selection of investment trusts

Here are the key advantages: basic share dealing is free, mostly; the service works in a very simple way; and the choice of available single stocks, investment trusts and exchange-traded funds (ETFs) is growing at a steady clip. By my calculations, as of last month the Freetrade platform offered 343 stocks in total 42 ETFs, 220 UK sterling stocks, 123 US dollar stocks and 31 investment trusts.

Clearly, this isn't the whole universe of US and UK stocks (and there are no European ones) but it's a decent slug of the large-cap universe. Crucially, there is also a good selection of ETFs and investment trusts, though in my view the choice of trusts is a bit eccentric. You get access to Vietnamese ones but not to Personal Assets or Edinburgh Worldwide. There is an emphasis on ETFs in the service because Freetrade's founder and chief executive Adam Dodds deems them "the best way to get diversified exposure to the stockmarket and other asset classes while paying low fees, with the added benefit of being tradable instruments during market hours".

Maybe, but many smart investors use investment trusts alongside their ETFs and more choice would be welcome. Freetrade assures me that it intends "to add some of the most sought after stocks like Uber and Pinterest... and more investment trusts to the app in the near future."

Freetrade has no phones to ring but good live chat

Given that it's an app, you'd probably think that customer service is terrible and yes, there are no telephones to ring if you want to trade. But I've found all my live chats about problems and questions very quick and efficient.

I have my small niggles, however. A regular investing process that automates your monthly buying would be helpful, as would automatic dividend reinvestment. The latter is on its way, apparently. If you are a very active trader with big sums to invest you probably won't like the absence of detailed information on the shares you buy and you also won't find the bid-offer spread when you deal. Finally, although Freetrade does offer an Isa, it doesn't do Isa transfers. Still, that might be about to change. "We'll be rolling out account transfers... including Isa transfers... in the next few months," says Dodds.

But there are some appealing additional features to the service. The foreign exchange spread on foreign (dollar) trades is 0.45%, which may not be the cheapest around but isn't bad either. The Isa is currently free but will cost £3 a month from July, again fairly competitive. And if you do want to execute an instant trade, that'll only cost you £1 a trade.

That is close to the rate charged by Freetrade's nearest competitor Degiro, which offers a wide range of services but no Isa wrapper. I don't doubt that HL, AJ Bell and Interactive Investor will give you a more full-service platform (with stock data, commentary and Sipps) but for those simply looking for regular, low-cost savings I think Freetrade is hard to beat.

Recommended

Will fintech change the face of banking?
Alternative finance

Will fintech change the face of banking?

Fancy new apps have become popular for everything from making a payment to buying insurance and shares. Should the big banks be worried? Simon Wilson …
17 Oct 2020
Great frauds in history: crypto-queen Ruja Ignatova and her “bitcoin killer”
People

Great frauds in history: crypto-queen Ruja Ignatova and her “bitcoin killer”

Ruja Ignatova convinced punters to put up to $12bn into her worthless "OneCoin" cryptocurrency – then disappeared with the loot.
27 Aug 2020
P2P lending sector’s growth put on pause
Alternative finance

P2P lending sector’s growth put on pause

The online P2P-lending revolution has run into trouble, but don’t write it off just yet, says David C Stevenson.
25 Aug 2020
Market crash exposes the risks in P2P lending sites
Alternative finance

Market crash exposes the risks in P2P lending sites

The increased risk that goes with the supercharged returns from P2P lending is coming to the fore.
24 Apr 2020

Most Popular

The next 20 years: five new technologies on the horizon
Global Economy

The next 20 years: five new technologies on the horizon

What will everyday life be like in two decades’ time? Matthew Partridge peers into his crystal ball.
12 Nov 2020
This week’s rally in value stocks is just the beginning
Value investing

This week’s rally in value stocks is just the beginning

The arrival of a vaccine this week saw huge gains in the markets and investors switching out of big-tech growth stocks and into “value” stocks in more…
13 Nov 2020
Share tips of the week
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
13 Nov 2020